Fastow Charged With Mail Fraud, Money Laundering

The LJM2 partnership, and a predecessor entity called LJM1, engaged in nearly 30 such transactions with Enron over a period from late 1999 thru October 2001.

The criminal complaint outlines a pattern of "secret agreements" between Fastow and others at Enron that would require Enron to buy back assets sold to LJM if another buyer could not be found. These agreements apparently were kept from Enron's board of directors.

In addition, it alleges that Fastow and Causey -- although he's not identified by name -- manipulated Enron's balance sheet in a complex transaction that involved back-dating of documents.

One of the charges stems from Fastow's role in orchestrating the sale of three Nigerian barges by Enron to Merrill Lynch (MER Quote). Those barges were eventually sold back by Merrill to LJM2. The SEC described the sale of the Nigerian barges, which inflated Enron's profit by $12 million in 1999 and generated a $700,000 profit for Merrill Lynch, as a "sham sale."

In the SEC complaint, Merrill isn't named, but earlier this year a Congressional panel held a hearing into Merrill's role in the barge sale and in lining up investors for the LJM2 partnership. Three Merrill investment bankers who allegedly played a role in the barge deal are no longer with the firm. Two of them were fired by Merrill for refusing to talk to federal investigators.

One of the fired bankers is Schuyler Tilney, whose wife, Beth, used to be a vice president for marketing at Enron. She is credited with coming up with the idea for the company's infamous crooked E logo. The other fired Merrill banker is Thomas Davis, a firm vice chairman, who had been the running to lead Merrill at one time. The third banker coming under scrutiny is Robert Furst, who left Merrill late last year. Both Furst and Tilney worked out of Merrill's Texas office.